Workers’ Comp Fraud and the Myth of the Victimless Crime

By Eileen Cook, Claimant Fraud Unit Supervisor

By Eileen Cook, Claimant Fraud Unit Supervisor

A Texas Mutual claimant was injured while working in an oil field. He claimed he was unable to work and, in the meantime, launched his own oil field supply company. He then tried to purchase workers’ comp coverage for the new business from, you guessed it, Texas Mutual.

A truck driver, off work due to two fractured fingers and receiving income benefits, posted on his unprotected Facebook page that he was riding bulls again. The story then directed his readers to a YouTube video demonstration that showed the allegedly disabled hand wrapped in the rope.

These are examples of a scam that investigators call double-dipping. In double-dipping scams, claimants collect benefits for being too injured to work when they are, in fact, gainfully employed. Texas law requires claimants to notify their workers’ comp company when they return to work.

Some people think workers’ comp fraud is a victimless crime that only affects insurance companies with “deep pockets.” That could not be farther from the truth.

For years, experts have estimated that fraud costs the property and casualty (P&C) insurance industry, of which workers’ comp is part, $30 billion a year. A 2013 study by Aite Group found that number to be conservative at best, and grossly naïve at worst.

The study estimates that in 2012, fraud bilked $64 billion from the P&C industry. By 2015, the bill could reach a whopping $80 billion a year. Those costs will trickle down to everyone in the form of higher premiums.

Insurance carriers have a vested interest in containing the costs of fraud, and most are stepping up their efforts. In 2012, P&C companies spent $271 million fighting fraud. The study predicts spending to rise by $20 million a year, reaching $360 million by 2016.

I am encouraged by the industry’s commitment to uncovering and punishing those who cheat the system. I also know, however, that the insurance industry cannot win this fight alone. Employers must do their part.

Learn the red flags

Many of Texas Mutual’s most successful fraud investigations started with a tip from an employer. If you see two or more of these red flags in a claim, contact your workers’ comp provider immediately:

  • Suspicious injury on Monday or Friday
  • New or disgruntled worker
  • No witness to alleged injury
  • Inconsistent or illogical description of incident
  • Tip from a credible source
  • Hard to contact injured worker
  • Injured worker avoids contact or acts upset/defensive when contacted
  • Injured worker has a pattern of missed medical appointments

Cooperate with the investigation
Your responsibility is not limited to reporting your suspicions. Your investigator may need your help during the investigation:

  • Provide a photo and complete description of the employee
  • Tell the investigator about dual employment or hobbies
  • Notify the investigator if new evidence surfaces
  • Allow access to the workplace and witnesses
  • Attend hearings if requested

Claimant fraud is just one type of fraud that affects the workers’ compensation system. In future posts, we will look at premium fraud and provider fraud, which are less common but typically far more costly.

For more information about fighting workers’ comp fraud, visit Texas Mutual and the Texas Department of Insurance.

The price of workers’ comp fraud can be high for claimants who are caught cheating the system. Watch this short video for a real-life example.

About the author
Eileen Cook has more than 40 years’ experience in law enforcement and fraud investigations. She spent 12 years as an investigator with the Brazoria and Midland County Sheriff’s Departments. After leaving law enforcement, Cook served as a training specialist at the Texas State University Institute of Criminal Justice Studies, where she trained police and probation officers for 10 years. Eileen has been helping Texas Mutual fight fraud and its cascading effects on policyholders since 1995. Cook earned a degree criminal justice from the University of Houston at Clear Lake City.

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